Lower trade deficit (the excess of imports of goods and services over exports of goods and services) in the fourth quarter of FY16 at $24.8 billion as against the $31.6 billion in the year-ago period saw current account deficit narrow to $0.3 billion during the fourth quarter of FY16.
Current account deficit is the difference between exports of goods and services and imports of goods and services plus net unilateral transfers (aid, grants, gifts and pensions) plus net inflow of interest and dividend.
The deficit on the current account stood at 0.1 per cent of GDP.
RBI in its release said that net receipts of services declined on a year-on-year basis as exports of transport, financial services and telecommunication, computer and information services declined.
Remittances also declined year-on-year and stood at $15.7 billion in the fourth quarter of FY16. Net FDI also declined from from $9.3billion in Q4FY15 to $8.8 billion Q4 FY16 .
Foreign portfolio investors were net sellers worth $1.5billion as against the net buy worth $12.5 billion in the year ago period.
India added forex reserves worth $3.3 billion in Q4FY16 besides adding NRI deposits over the year ago period according to RBI.
The current account deficit for the fourth quarter shrunk to 1.1 per cent of GDP from 1.3 per cent in FY15 on account of lower trade deficit.
FDI inflows grew 15.3 per cent over FY15 and added $36 billion while FPIs withdrew $4.5 billion during FY16 as against an inflow of $40.9 billion. Forex reserves worth $17.9 billion were added in FY16 as against an addition of $61.4 billion in FY15.
Madan Sabnavis, Chief Economist Care Ratings, said, “Our trade numbers continue to look good this year (FY17), and with a continuation of the same, we can expect the current account deficit (CAD) to remain in the 0.5 per cent GDP range in the next two quarters. Any revival in commodity prices can turn things around, as the trade balance has been the driving factor behind this performance. A strong CAD will provide support to the RBI when it comes to addressing issues on redemption of the FCNR deposits from September onwards.”